HomeLocal NewsMinistry admits flouting rules in US$1,2bn loans controversy

Ministry admits flouting rules in US$1,2bn loans controversy


FINANCE ministry permanent secretary George Guvamatanga (pictured) has admitted to government flouting its borrowing regulations on controversial loans amounting to US$1,2 billion that Zimbabwe acquired dating back to January 2017,the Zimbabwe Independent can reveal.

This comes, as Zimbabwe, battling to settle its US$17,6 billion debt (which government now claims is ZW$66,8 billion), has failed to unlock fresh lines of credit from International Finance Institutions(IFIs) as part of its re-engagement drive, particularly with the West.

Guvamatanga made the disclosures in an affidavit opposing a High Court application by Harare North legislator Allan Norman Markham (MDC), seeking an order to nullify a loan agreement entered between the Ministry of Finance and the Reserve Bank of Zimbabwe (RBZ) with the African Export-Import Bank (Afreximbank).

“I am seeking that certain acts of commission or/omissions by the first respondent (Finance minister Mthuli Ncube) and second respondent (RBZ) be declared to be contrary to the Constitution of Zimbabwe and that the loan agreement entered by or by both parties, with the third respondent (Afreximbank) are not binding on Zimbabwe as they have not been approved by Parliament as expressly prescribed by the Constitution,” Markham said in his founding affidavit.

Markham, who is a co-applicant in the matter together with Community Water Alliance Trust, is being represented by Zimbabwe Lawyers for Human Rights lawyer Denford Halimani.

However, Guvamatanga, in a notice of opposition on behalf of Treasury boss Ncube, said this cannot be granted as it would make Zimbabwe break international treaties and also weaken the southern African country’s poor credit rating.

“Assuming without admitting the first respondent (Ncube) concluded any loan agreement and guarantees under the authority of the President which have been averred by the applicant (Markham) in his founding affidavit, that would have been an oversight on the part of the first respondent and myself,” Guvamatanga said.

“With regards to the guarantee itemised paragraph 6 (US$500 million loan facility to stabilise the currency market which was guaranteed by the state with platinum production as collateral), which was concluded in May 2019, it is admitted that the guarantee was required to be published under the provisions of the Public Debt Management Act and the Constitution.

“It appears that there was an oversight in this regard for which, Ncube and I are responsible. The first respondent apologises for this oversight and will take all reasonable steps to ensure that he complies with his constitutional obligations under the Constitution. First respondent has taken steps to ensure that the appropriate notice is duly gazetted in the government gazette.”

Under scrutiny are six loans including the Musami-Kunzvi dam construction loan; the loan guaranteed for the Harare Morton Jaffrey works refurbishment; US$500 million loan facility to promote imports and exports; the loan facility to guarantee 1:1 convertibility value of RTGS balances into United State Dollars and availability of the greenback for nostro foreign currency accounts; US$225 million letters of credit for fuel imports and the production of basic commodities and the US$500 million loan facility to stabilise the currency market which was guaranteed by the state with platinum production as collateral.

In the application, the RBZ and the continental bank are cited as the second and third respondents. Guvamatanga said Zimbabwe was part of the international community of nations which has laws that requires that treaties should be performed in good faith by all countries and entities who enter into them.

“As a country, Zimbabwe cannot use the absence of parliamentary approval of the loans and guarantees which it would have entered into to breach its obligations under treaties it entered into with 3rd respondent (Afreximbank). The country’s credit rating, which is extremely low at the moment, would vanish altogether.

As such it would be inappropriate for the court to grant the order sought by the applicant interdicting the republic of Zimbabwe as a country from performing its international obligations,” he said.

Guvamatanga said international treaties applied to the loan agreements between Zimbabwe and Afreximbank as it is a commercial international bank whose shareholders comprise of a number of states and central Banks in Africa.

“The Reserve Bank of Zimbabwe is a class A shareholder in that bank. The Republic of Zimbabwe is a class B shareholder. As such, any loan or guarantee concluded with that bank amounts to an international treaty,” he said.

“What is critical to note from section 327 (2) is that the treaty will have been concluded by either the President himself or under his authority.

This must be contrasted to loans and guarantees incurred by the Reserve Bank of Zimbabwe which are incurred under the general authority of the legislature as outlined in the provisions of the Reserve Bank of Zimbabwe Act. Such loans and guarantees are not covered under the purview of section 327(2) or (3).”

“Any authority to lay loans and guarantees incurred by the Reserve Bank of Zimbabwe must emanate from the provisions of the Reserve Bank of Zimbabwe Act itself. Consequently, all loans and guarantees entered into by the Reserve Bank of Zimbabwe are excluded from the provisions of section 327 of the Constitution. Further, the provisions of the Public Debt Management Act with regards to the publication of loans and guarantees does not apply to the Reserve Bank of Zimbabwe.”

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